A tariff on a good increases the domestic price of the good, increases domestic production of the good, reduces the amount of the good sold, and decreases imports of the good.

Question

Quizplus · Accepted Answer

A tariff is a tax on imported goods, which makes the price of the imported good more expensive in the domestic market. This price increase can make domestic production relatively cheaper, and therefore increase domestic production of the same good. With domestic production being competitive, some customers (perhaps not all) will switch to buying domestic instead of imported goods, reducing the amount of the good sold, and also decreasing the amount of imports.

A Tariff on a Good Increases the Domestic Price of the Good